U.S. POSTAL SERVICE
Status, Financial Outlook, and Alternative Approaches to Fund Retiree Health Benefits

GAO (U.S. Government Accountability Office), December 4, 2012

The Postal Service Retiree Health Benefits Fund (PSRHBF) covered about 49 percent of the U.S. Postal Service’s (USPS) $94 billion retiree health benefit liability at fiscal year-end 2012. USPS’s deteriorating financial outlook, however, will make it difficult to continue the current prefunding schedule in the short term, and possibly to fully fund the remaining $48 billion unfunded liability over the remaining 44 years of the schedule on which the 2006 Postal Accountability and Enhancement Act (PAEA) was based.

USPS is intended to be a self-sustaining entity funded almost entirely by postal ratepayers, but its financial losses are challenging its sustainability. GAO has testified that USPS should prefund its retiree health benefit liabilities to the maximum extent that its finances permit, but none of the funding approaches may be viable unless USPS has the ability to make the payments. USPS’s default on its last two required PSRHBF payments and its inability to borrow further make the need for a comprehensive package of actions to achieve sustainable financial viability even more urgent.

USPS agreed that comprehensive reform is necessary to achieve financial sustainability. It also recognized its obligation to provide effective, affordable health benefits to its employees and retirees, but said that it does not have the financial resources to make prefunding payments required by current law.

http://www.gao.gov/products/GAO-13-112

Linking health insurance to employment has contributed greatly to the dysfunction of health care financing within the United States. If it were a good method, you would think that the United States Postal Service would provide an exemplary model for such financing.

This GAO report confirms that none of the proposed funding approaches for the Postal Service Retiree Health Benefits Fund may be viable unless USPS has the ability to make the payments. The USPS has responded in writing that “it does not have the financial resources to make prefunding payments required by current law.”

It is long past time to take the employer out of health care coverage and financing decisions. Instead, we should establish our own single universal risk pool funded equitably through the tax system. Employers could get on with the task of managing their own businesses, while our public stewards would take charge of managing more efficiently and more assuredly health care financing for all of us.